Category Archives: End the Fed

Every once in a while, I peek over the parapet of my smart, sentient, reasoning friends to see what the rest of the world is talking about. Usually, I get hit in the eyes and ears with bewildering, invincible stupidity.

In the words of Murray Rothbard: “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

1) “The Boom Bust period of 1797 to 1933.” It’s very important to understand that booms and busts are caused by artificial increases in the monetary supply (Austrian Business Cycle Theory). She doesn’t seem to have a grasp on this. http://mises.org/daily/672 Business cycles are not caused by a lack of regulation.

3) Pre-1914 booms and busts. If you don’t criminalize fractional reserve banking, then bank-runs should be regarded as a GOOD thing. Bad banks went bankrupt. Good ones remained. Customers were careful. Responsible people succeeded. Irresponsible people found other work. The 1914 creation of the Federal Reserve was a government take-over of the money-printing process.

4) If you want to get rid of booms and busts, you must firstly understand understand ABCT, and secondly you must get rid of fractional reserve banking which is inherently fraudulent. We don’t even need more laws to accomplish this. They just need to stop putting people in jail who trade in silver or gold (http://www.nytimes.com/2012/10/25/us/liberty-dollar-creator-awaits-his-fate-behind-bars.html) and the market will, all by itself, move from fractional reserve money to sound money.

4) FDIC insurance. Banks used to advertise their liquidity to customers because it matters. Now that everyone is insured by the US taxpayers, it no longer makes any difference where you bank. Since the government has put all the RISK on the taxpayers, let’s not be surprised that the bankers act more recklessly.

5) “We had to bail them out” WHY?????? Why isn’t letting irresponsible banks go bankrupt ever on the table? I had an internet business that didn’t do so well. Why didn’t I get bailed out?

6) The S&L crisis was caused by deregulation. No it wasn’t. It was caused by government removing risk from the banks and them (very predictably) acting irresponsibly. Instead of letting them go bankrupt, the taxpayer was forced to bail them out further promoting risky behaviour.

7) The crisis with the hedge fund Longterm Capital Management was caused by deregulation. No it wasn’t. It was caused by government removing resk from the banks and them (very predictably) acting irresponsibly. Instead of letting them go bankrupt, the taxpayer for forced to bail them out further promoting risky behaviour.

8) There is even more centralization in the banking industry since 2008-2013. If you stop fucking bailing out the Big 4, then smaller, more responsible banks would have taken over their assets long ago.

9) Regulation works. No it doesn’t. The Bernie Madoff Ponzi scheme was handed to the SEC on a silver platter by a PRIVATE investor looking out for his investment. They SEC ignored it while the Ponzi scheme grew from 4 billion to 50 billion. Bernie Madoff bragged about his close relationship with the SEC. The only regulation that works is letting irresponsible people go bankrupt.

Some context for foreign Gold storage: Nixon cut the dollars last ties to gold in 1971 when the French wanted gold for the money they lent us during the Vietnam war. He basically said, screw you, you’re only getting paper. This is a little appreciated source of Franco-American animosity. The situation with Germany is different. Because of the Soviet military threat, many European countries kept much of their gold reserves in the US.

The Concern: Many people believe the Fed doesn’t actually have Germany’s gold. People say this from varying depths of the rabbit hole of conspiracy. What’s clear is that the Fed has steadfastly resisted any audit of its gold.

Possible Outcomes: If the Fed continues to refused, as they’ve done with previous requests of the Bundesbank, it will cause a huge loss of confidence in the US Fed. (For some stupid reason, people still have confidence in the US gov’t.)

If those Germans continue to insist on their gold, as they should, then a gigantic house of cards might come tumbling down. The likely effects are a huge loss of confidence and a soaring gold price.

I think the more likely outcome at this point is that the media will being calling the Budesbank Nazis and they’ll retreat with their tail between their legs — but that will only work for so long.

From Dan Amoss of the Daily Reckoning, originally published in September 2012:

“For years, I’ve expected that at the end of all this central bank printing, we’ll see the end — not a reversal — of quantitative easing programs and a re-pegging of the US dollar to gold at much higher gold prices. A new gold standard would allow the Fed and other central banks to save face after the following sequence of events:

1. Central banks inflate their balance sheets and buy up many of the bonds governments issue to fund soaring budget deficits
2. Once the largest suppliers of scarce products realize they’re exchanging products for infinitely diluted paper money, they start demanding more and more money in exchange for sending their scarce products to the marketplace
3. Consumer prices start rising
4. Calls for monetary tightening (reduction of central bank balance sheets and interest rate hikes) grow louder
5. These central banks won’t be able to slash money supplies without crashing government bond markets and stock markets. They talk about tightening, but don’t tighten
6. As central banks lose credibility, gold launches on a final, near-vertical stage of its bull market
7. In response to inflation expectations running wild, governments and central banks draw up plans to re-peg currencies to gold in order to avoid having to drain trillions worth of cash from the banking system.”

In the face of imminent hyperinflation, Dan Amoss postulates that the Fed will back the dollar with gold at some significantly higher price in order to avoid a complete collapse of the dollar. It is reassuring that the Fed can do this, but will it? Another scenario is that some large and important country, such as Germany or China, will back its currency with gold and cause demand for the dollar as the preferred means of international settlement to fall. This will cause prices to rise in the US as overseas dollars start to flow back into the only economy where they must be accepted for all debts public and private. (Read more)

Ben Bernanke began his press conference with a touching tribute to the unemployed. Oh, how he cares! And so deeply! His description of the problem was accurate enough. But then out came the smoke and mirrors.

Bernanke said that to remedy the unemployment problem, he will continue the Fed’s program of asset purchases. Specifically, the Fed will continue to buy and hold mortgage-backed securities . . . .

But here’s the disconnect. What the devil does buying bad debt from zombie banks have to do with getting people jobs? The relationship between assets purchases and policy goals is murky at best.

“I need a job, so I hope the Fed buys more bad mortgage debt” — said no unemployed person ever.

Yes, I know about ancient Keynesian theories. There is tradeoff between unemployment and inflation. But those theories have not really explained much at all for the last 40 years. In fact, they blew up in the 1970s with the emergence of “stagflation.” An affliction where unemployment remains high even as inflation roars ahead. (Read more)

A 21-year-old Bangladeshi man tried and failed to blow up the Federal Reserve Building in downtown Manhattan on Wednesday, largely thanks to the efforts of the Federal Bureau of Investigation. That “thanks” ought to be attached both to the “tried” and the “failed” parts of that sentence, since it was the FBI that not only coaxed the suspect, Quazi Mohammad Rezwanul Ahsan Nafis, into moving forward with the bombing but also supplied him with the means to do so. Don’t worry. The Feds know what they’re doing. They do this all the time. (Read more)

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Lew Rockwell: “The FBI and NYPD recruited and trained some schnook to fake-bomb the Federal Reserve Bank of New York. It’s more of the phony, government-generated “terrorist under the bed” stuff that’s supposed to make us shiver. It may also be an attempt to smear those who intellectually oppose the bankster temple.”

This is such an outstanding piece of bullshit, that I just had to post it. Who are these people?

U.S. home prices rose for a sixth straight month in July in the latest sign of a sustainable housing market recovery, while a jump in consumer confidence this month offered a harbinger that Americans are ready to loosen their spending.

Six years after its collapse, economists believe the housing market has turned a corner.

Two separate reports on Tuesday showed that home prices rose in July, though the gains were not as strong as the previous month. That follows recent data that home resales and groundbreaking on new properties rose in August, while business sentiment among homebuilders hit a more than six-year high this month. (Read more)

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The last QE3 is aimed explicitly at the housing sector. The government is printing huge amounts of money and throwing it at the housing sector, then these idiots have the temerity to suggest that rising home prices are a sign of recovery!